The Dow Jones Industrial Average closed lower despite rallying off lows Monday after Federal Reserve Chair Jerome Powell spoke out on interest rates. Magnificent Seven stock Nvidia rallied on a price-target hike while Alphabet and Apple also rose. Meanwhile, well-known fund manager Cathie Wood snapped up a stock that's plunging.
Stocks on the move included social media play Snap, which fell after it announced job cuts. Meanwhile, a trio of strong stocks tested buy points. MongoDB, Synopsys and JFrog flirted with entries.
Powell Speaks Out On Interest Rates
Many investors have been betting on imminent cuts to interest rates. But Fed Chief Powell poured some cold water on that notion in a rare interview that aired Sunday.
The case for quick rate cuts was weakened by last week's jobs report, which came in far hotter than expected. And on Monday the ISM nonmanufacturing reading came in at 53.4, above expectations. It grew for the 13th month in a row.
Meanwhile, Powell made the case for being careful and not moving too quickly when he appeared on "60 Minutes."
"We want to see more evidence that inflation is moving sustainably down to 2%," Powell said. And while he said that central bankers' confidence is rising, they "want some more confidence before we take that very important step of beginning to cut interest rates."
The 10-year yield vaulted 14 basis points to 4.17% while the two-year yield popped 11 basis points to 4.48%.
Nasdaq Fightback Fails, Small Caps Mauled
The Nasdaq composite briefly rallied into positive territory but ended the session down 0.2%. ON Semiconductor surged 9.5% on an earnings beat.
The benchmark S&P 500 also closed off lows but still ceded 0.3%. Air Products and Chemicals plunged 15.6% after the firm missed earnings views.
The S&P 500 sectors closed in mostly negative territory. Only health care and technology rose on the stock market today. Materials and utilities struggled the most.
Small caps were mauled by the bears, the Russell 2000 falling 1.1% and closing under the 50-day moving average. Growth stocks impressed, the Innovator IBD 50 ETF rising 0.4%.
Dow Jones Today: Caterpillar Shines, Boeing Stock Falls
The Dow Jones lagged the other major indexes, ending the day down nearly 274 points, or about 0.7%.
Caterpillar fared best on the much-watched index after posting strong earnings. It climbed nearly 2% but ended well off session highs.
The firm benefited from particularly strong sales in North America. Caterpillar stock is extended from a 293.88 entry.
By contrast, fast-food giant McDonald's dropped 3.7%. It was slapped lower after turning in mixed quarterly results. Revenue came in slightly below Wall Street expectations.
Boeing also hurt the Dow Jones today. It fell 1.3% on reports the aerospace giant will have to rework 50 undelivered 737 Max airplanes after a new fuselage problem was uncovered. 3M and Walgreens Boots Alliance also struggled, both falling more than 2%.
Cathie Wood Buys More Tesla Stock
Buying on the dip can be a risky strategy for most investors. But that was not enough to stop fund manager Cathie Wood taking advantage of a big pullback in one of her favorite stocks as she hunts for potential bargains despite the risks.
Her firm Ark Invest, of which she is chief executive and chief investment officer, snapped up nearly 88,000 shares of Tesla Friday for the ARK Innovation exchange traded fund.
Tesla stock fell nearly 3.7% Monday and currently trades below its 50-day and 200-day moving averages, MarketSmith analysis shows. This is a distinctly bearish look.
In fact, TSLA is now down more almost 40% from its 2023 high of 299.29, and more than 56% below its record high of 414.50, reached in November 2021.
Other moves made by the fund Friday included adding nearly 1.6 million shares in penny stock Ginkgo Bioworks and buying close to 160,000 shares of Intellia Therapeutics. Both were lower Monday morning.
Bargain hunting can be tempting for investors but IBD recommends buying stocks with strong earnings and price performance rather than laggards. Look for leaders in strong industries that are showing superior earnings growth and sales.
Dow Jones Rallies; Cathie Wood's Top Pick Surges On This
Magnificent Seven: Nvidia Gets Target Hike
So-called Magnificent Seven stocks were having a mixed start to the week Monday.
Among Magnificent Seven stocks outside the Dow Jones index, Nvidia fared best, gaining 4.8%. The Leaderboard stock is extended past its most recent entry. The chip stock, a leader in artificial intelligence, surged on a price-target hike from Goldman Sachs to 800 from 625.
"Forward-looking commentary on (generative AI) related capital spending was consistently positive across all major U.S.-based hyperscalers," Goldman analyst Toshiya Hari said in a note to clients.
Google-parent Alphabet was also solid as it rose 0.9%. Dow Jones stock Apple rose 1%, off session highs.
Other Magnificent Seven names were lagging, though. Microsoft fell 1.4%, Meta Platforms skidded 3.3% and e-commerce giant Amazon.com dropped 0.9%.
Outside Dow Jones: Smell Of Success For Estee Lauder Stock
Makeup giant Estee Lauder shone brightly Monday following its latest quarterly report.
Shares jumped nearly 12.1% after the company crushed earnings views, though it failed to retake the 200-day moving average. Estee Lauder stock turned in a 43% drop in adjusted earnings to 88 cents per share, after four quarters of accelerating declines.
This was still enough to beat Wall Street estimates of 54 cents, according to FactSet. Net sales fell 7% to $4.28 billion, but came in above forecasts of $4.19 billion.
The perfume play also smelled of roses due to newly announced layoffs and a restructuring plan. It plans to reduce its workforce 3% to 5% as part of a profit recovery plan.
The company is aiming for more sustainable profitability while also supporting sales growth acceleration. It also hopes to lower its cost base and overhead expenses.
Snap Stock Falls Amid Job Cuts
Investors sometimes cheer the prospect of efficiencies when companies announce job cuts.
But Snap failed to benefit from that Monday. Shares rallied off lows for the day but closed down 1.8%. Snap said it plans to jettison 10% of its global workforce, or more than 500 employees.
Snap stock lost ground on a consolidation pattern buy point of 17.90, according to MarketSmith analysis.
Another risk for Snap stock is the company's fourth-quarter earnings, due after the close Tuesday.
NVO Stock Pops On Acquisition News
Novo Nordisk was another noteworthy name faring well on the stock market today.
It popped on word that its parent company Novo Holdings plans to buy drugmaker Catalent for $11.5 billion. The parent company has agreed to sell Novo Nordisk three Catalent manufacturing sites in order to expand Novo's supplies of its blockbuster Wegovy weight-loss drug.
Novo Holdings will buy Catalent for $63.50 a share in cash. CTLT popped 9.7%, but closed a few dollars shy of the offering price.
A Leaderboard stock, Novo Nordisk jumped 4%. Novo Nordisk stock remains extended past its most recent buy point of 105.69.
Outside Dow Jones: 3 Stocks Eye Entries
With the market's continued strength, IBD is recommending exposure in the 80%-to-100% range. Here are three strong stocks worthy of consideration.
MongoDB tried to break out past the 442.84 buy point of a cup base but faded, MarketSmith analysis shows.
MDB is in the top 5% of stocks in terms of price performance over the past 12 months. MongoDB provides an open-source database platform for businesses around the globe.
Meanwhile, Synopsys has formed a cup-with-handle base and is trading just above an ideal buy point of 554.57. It was already actionable from clearing a downtrend within the handle or from the top of the base.
JFrog stock is in a buy zone after clearing a flat base with a buy point of 35.35. This is a first-stage pattern, which is a bonus.
Overall performance here is once again top notch, with its IBD Composite Rating coming in at 99. Price performance is its strongest suit, but its EPS Rating of 81 out of 99 is still solid. Analysts see earnings soaring 1,009% in 2023 and up 17% in 2024, according to MarketSmith.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
